Thursday, March 31, 2016

SHARE PRICES HAVE CONTINUED THEIR RUSH SKYWARD following Dr. Yellen’s “All-Clear” signal to the investment world Tuesday when she spoke to the Economics Club of New York, telling the world that it was she and no one else at the Fed who was in charge of monetary policy and said, without equivocation that the Fed under here aegis will not be tightening monetary policy any time soon. This is, it seems, the best of all equity investment worlds where economic growth is slow but steady; where inflationary pressures… at least in the eyes and mind of the “authority”… is not problematic and shall not be, and where monetary policy shall be accommodative.We may not agree with what Dr. Yellen is proposing… and what she will pursue… or why she is proposing and pursuing it… but it is not our duty to argue and then to take positions openly at odds with her, for as the great, departed and greatly missed Mr. Marty Zweig always said, “Don’t fight the Fed.” It is our duty, instead, to understand that the Fed’s “margin account” is far larger than is ours; that it is effectively unlimited and that as the equally great Lord Keynes said, “The market can remain irrational far longer than we can remain solvent.” We may think Dr. Yellen’s actions are irrational; we may see them in the end as being disastrous; we may fully expect them to come to naught and very probably they shall, but taking positions in opposition them and to her shall cause us to lose both mental and real capital. It is a fight we may win eventually, but eventually can be a very, very, very long while off into the future.To this end, we note then that our International Index has gained 79 more points, or 0.9% since yesterday, but even so it remains down for the year-to-date by 2.1%. Stocks here in the US, however, as measured by the S&P are actually higher by 1.0% while we here at TGL, in our retirement fund, are up 6.7%, with our “out-performance” relative to global and domestic stocks narrowing rather sharply yesterday. We enter today’s markets long of gold in EUR and Yen related terms; long of the long end of the US bond market via the 20 year bond ETF; long of small position in an oil E&P producers and long of another small position in the corn ETF. We have no actual net long or short position in equities, however.

Wednesday, March 30, 2016

Drillers know where the oil is and don't have to drill 15 times before they hit oil. 15 years ago it was a 50/50 percent shot. Today, drilling and hitting oil each time is a sure thing. And, with the advent of horizontal drilling, they can maneuver underground like never before.

Just because fracking is limited in the U.S. doesn't mean other countries can't employ this technology. Africa and South America can easily hire American frackers to extract oil.

Monday, March 28, 2016

The attack that happened in Brussels earlier this week would have sent crude oil up $5 per barrel instantly. A market that doesn't go up on formerly bullish news is not a bull market.It's still a bear market in crude oil. Each low is lower, each high is lower. And perhaps most importantly the contango has begun widening out again. The carrying charges have begun to widen out. Crude is abundant and once again bidding for storage. I think for the next year or so, WTI crude oil could stay $5 plus or minus.. $37 per barrel for the spot. I think $42 on the spot is the highest we are going to go for a long period of time. The trend is lower and on rallies you have to be a seller.There is a lot of crude oil that has been capped and, on the rally, those caps are coming off that production. There's a lot of overhead that has to be accommodated. That tends toward lower prices.

OPEC meeting

I was surprised that the market got that exercise on the upside predicated upon the idea of a meeting of some sort. I think it was astonishingly comical that everybody got that excited.

Tuesday, March 15, 2016

We continue to be bemused and actually quite amazed at the EUR’s strength since Thursday for we continue to believe that what the ECB had done in announcing a €20 billion/month increase in the purchase of debt securities along with cuts in all three of its interest rates and along with the announcement that it shall buy corporate as well as sovereign debt securities to effect the monetization program far, far out-trump the single sentence that Dr. Draghi made regarding the unlikely nature of still lower rates to be the important concepts from the ECB’s monetary policy committee meeting last week. We continue to “see” Dr. Draghi’s comments on the lesser likelihood of lower rates as a mere “toss-off” to the Germans on the monetary policy committee rather than as a true policy statement. But clearly, for now, we are wrong given that the EUR has traded to 1.1200 from 1.0850 in the moments after the Bank’s announcements last Thursday.We continue to see this as the “Cool Hand Luke” effect: a “Failure to communicate,” but we may well be wrong there too for we had expected Draghi and others to move to clarify the situation as early as Friday and neither he nor they have done so.All of that said the focus in the markets this week shall be upon the Bank of Japan and upon the Fed, with the former already having met earlier today and ending its two-day meeting “this evening” when Tokyo reopens, while the Fed’s two day meeting begins tomorrow and ends Wednesday, with a regularly scheduled press conference to follow.Concerning the BOJ, we suspect that those on the monetary policy committee are still reeling from the response the market gave to their decision to move to negative interest rates. We suspect that everyone on the committee had expected the Yen to weaken… perhaps materially… because of their decision and instead the Yen rallied… even more materially then they had hoped it would fall.Things, however, since have stabilized. The Yen has fallen back to the levels that effectively prevailed prior to the last meeting and we suspect that the Committee shall recommit to policies that will mandate a much weaker Yen. Certainly we cannot imagine the Bank moving to adopt policies that shall strengthen the currency, for that would be anathema… we hopeRegarding gold, it fell rather sharply late on Friday, which we see as an attempt, once liquidity was wholly lacking and most market participants had shuttered in their trading operations for the week, by what we have in the past referred to as “nefarious” forces to break the market. To a great degree their efforts succeeded and we were prepared to walk in this morning to see gold down sharply once again. It is not. It is holding and we take some solace in that fact.We do indeed believe that the decisions made last week by the ECB are enormously expansionary and in the end inflationary, for the additional force feeding of €20 billion per month of “money” into the European banking system must be inflationary. It really cannot be otherwise, unless the banking system and money creation systems of the past have broken down entirely and that which we’ve come to understand as fundamental has now been rendered useless.

Monday, March 14, 2016

I don't like the gold bugs and I'm not a believer of the world coming to an end but I'm a believer in gold market at this point, have been quite bullish funded in Dollar, Yen and Euro terms. The trend is up, the trend has been up for the past several months and I continue to think that as long as the monetary authorities are going to remain as expansionary as they are. And what Draghi said which turned the market, he has made it abundantly clear that he's going to continue to expand the supply of reserves into the system. The Bank of Japan is going to throw more reserves into the system. And the Fed will have no choice to at least hold monetary policy steady, if not become more expansionary following what the leads are from the ECB. So monetary expansion equals higher gold prices. Thats what you got. Don't fade this trend.

Thursday, March 10, 2016

As the economy gets very strong and as the monetary authorities begin to tighten policy, capital comes out of the equity market and makes its way into plant and equipment. Stocks begin to weaken while the economy moves to new highs.I'm not short the market long term now. But I may be a few months from now.

Wednesday, March 9, 2016

I do think the commodity market whether its the grain market, iron ore, gold have all turned for the better. I think we've seen a market turn because the monetary authorities of the world other than the Fed continue to be expansionary. I think the ECB is going to be way and the Bank of Japan has no choice but to follow through on the same side.

Tuesday, March 8, 2016

I cant imagine crude is going to rally much further than where it is right now. If you do continue to see crude oil get a good deal stronger, and I don't think its going to happen, it would be detrimental to stock prices.If you take a look at broader periods, 1 or 2 year periods, instead of 2 or 3 month periods, the correlation between crude oil and stock prices are in contravention to each other. That's just what history has shown us over the course of the last 20 something years. The last 2 or 3 months is a different story.

Tuesday, March 1, 2016

We are selling the markets short once again, having been short recently and having covered that short only a “short” while ago. But we are sellers once again this morning, noting that as the global markets have rallied they have done so on lesser volume on balance. Volume should follow the trend and the trend and volume are pointing lower, not higher.

On balance we’ve done very little in the past few days and we are up a bit more than 10%... 10.3% to be precise…for the year-to-date. We have been very fortunate, hoping that our good fortunate shall obtain a while longer.

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